Exam 4: Activity-Based Costing, Lean Operations, and the Costs of Quality

Activity-based management refers to using activity-based cost information to make decisions that may increase profits while satisfying customers' needs.

Costs incurred to avoid manufacturing poor quality goods are considered to be

Carrol Company, which uses an activity-based costing system, produces travel trailers and boat trailers. The company allocates batch setup costs to the two products using the following basic data: Total budgeted setup costs for the year are $158,400. If the setup costs are allocated using direct labor hours, how much of the total setup costs would be allocated to boat trailers?

Refined costing systems can be used to allocate any indirect costs to any cost objects.

The cost of inspection at various stages of production is an example of a(n)

What will the use of departmental overhead rates generally result in?

Non-value added activities are

Beartowne Enterprises uses an activity-based costing system to assign costs in its auto-parts division. The following units were produced in December with the following information: Total manufacturing costs for Part 001 is

Salvatore LLC provides a wide variety of legal services and uses an activity-based costing system. Data from its activity-based costing system for all services follows: The cost pool activity rate for client meetings is

Cross Roads Manufacturing currently uses a traditional costing system. The company allocates overhead to its two products, Zips and Dees, using a predetermined manufacturing overhead rate based on direct labor hours. Here is data related to the company's two products: Information about the company's estimated manufacturing overhead for the year follows: Total estimated direct labor hours for the company for the year are 110,000 hours. The company is evaluating whether it should use an activity-based costing system in place of its traditional costing system. Additional information about production needed for the activity-based costing system follows: The amount of manufacturing overhead that would be allocated to one unit of Dees using an activity-based costing system would be closest to

Potter & Weasley Company had the following activities, estimated indirect activity costs, and allocation bases: Potter & Weasley uses activity based costing. The above activities are used by Departments P and Q as follows: How much of the account inquiry cost will be assigned to Department Q?

The cost of testing incoming raw materials from a supplier would be classified as a(n)________ cost.

Non-value added activities are activities that neither enhance the customer's image of the product or service nor provide a competitive advantage.

Bilingsly Limited, a manufacturer of a variety of products, uses an activity-based costing system. Information from its system for the year for all products follows: Bilingsly Limited makes 450 of its product B63 a year, which requires a total of 53 machine hours, 13 inspection hours, and 19 orders. Product B63 requires $45.70 in direct materials per unit and $58.20 in direct labor per unit. Product B63 sells for $265 per unit. What is the product margin in total for Product B63?

Cooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Cooper's Bags Company sells the bags in cases of 1,000 bags. The bags come in three sizes: Large, Medium, and Small. Currently, Cooper's Bags Company uses a single plant-wide overhead rate to allocate its $8,088,000 of annual manufacturing overhead. Of this amount, $2,210,000 is associated with the Large Bag line, $3,418,800 is associated with the Medium Bag line, and $2,459,200 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 40,000 machine hours: 13,000 in the Large Bag line, 15,400 in the Medium Bag line, and 11,600 in the Small Bag line. Cooper's Bags Company uses machine hours as the cost driver for manufacturing overhead costs. The plant-wide manufacturing overhead rate would be closest to

Kramer Company manufactures coffee tables and uses an activity-based costing system to allocate all manufacturing conversion costs. Each coffee table consists of 20 separate parts totaling $240 in direct materials, and requires 5.0 hours of machine time to produce. Additional information follows: What is the total manufacturing cost per coffee table?

Waste can be reduced by implementing shorter setup times.

Alexander Inc. uses activity-based costing. The company produces two products: Snaps and Pops. The expected annual production of Snaps is 1,500 units, while the expected annual production of Pops is 2,200 units. There are three activity cost pools: Assembly, Testing, and Packing. The estimated costs and activities for each of these three activity pools follows: The cost pool activity rate for Testing would be

A departmental overhead rate is calculated by dividing the total estimated departmental overhead cost pool by the estimated total amount of the department's cost allocation base.

Value-added activities are activities that could be reduced or removed from the process with no ill effect on the end product or service.